Mondelez Brings Out the Treats to Tempt Consumers

By John Revill

Grabbing many of the goodies from the pantry, Mondelez International Mondelez International, the snack food spin off from Kraft Food, officially started trading Tuesday.

With a downbeat economic outlook in Europe, its biggest market, and concerns about a looming obesity epidemic, it’s perhaps not the best time to be launching a company with a product line-up which includes Cadbury chocolate, Toblerone and LU biscuits.

“We are not recession proof, but we are recession advantaged given the strength of our brands,” said Tim Cofer, the European president of the business.

Of course he has to say that, but the numbers appear to back up his confidence. For the first half of this year sales at Kraft Europe–which comprised much of Mondelez’s operations–increased by 4.2%. This included a 1.5% rise in additional sales volume, rather than price hikes alone.

This is better than the 2.4% European sales growth achieved by Swiss food giant Nestlé, with only 0.1% of sales in the region generated by extra sales volumes. Globally, though, Nestlé grew its sales by 6.6%, with 2.9% coming from extra volumes.

A spokesman for Nestlé said “the company is doing very well everywhere.” Unlike Mondelez, Nestlé does not put a particular emphasis on treats for consumers, he added.

In the long run, gaining volumes is better than achieving higher prices because it shows existing consumers are buying more products or new customers are being lured.

And in the world of snacking, this could mean big business. The snacks market in Europe alone is worth $335 billion a year, according to Mr. Cofer.

“Snacking in western Europe is growing quicker than meal-based food,” he said. “We see a growth rate 30% faster than in the non-snacking category,” he added.

In recent years, Nestlé has made much of its focus on nutrition, health and wellness–reducing the fat, sugar and salt content of many of its products to make them healthier.

These products promise better profit margins, but customers still like their treats. Analysts say the best strategy is to be in both categories.

“Nestlé has both–snacks and healthier foods,” said Patrik Schwendimann, an analyst at Zuercher Kantonalbank. But “the reality is that people like snacks and confectionary,” he added, which should bode well for Mondelez and its investors in the long term.

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